Handheld computers

Palms together

IN THE electronic world, upstarts quickly become vulnerable incumbents. Only three years ago, 3Com's PalmPilot hand-held computer was launched and swiftly swept the floor with its rivals. Last year the people who ran Palm Computing walked out, started their own company, Handspring, and now they have launched a smarter competitor. 3Com is evidently terrified, but they are not the only ones that need to worry. Handspring should give Microsoft pause for thought, too.

On September 14th Jeff Hawkins, the designer and brains behind the entire PalmPilot range, unveiled Handspring's rival range, called Visor. Using the Palm operating system, licensed from 3Com, Visor is cheaper and faster than the basic 3Com devices.

Given 3Com's paranoia about Handspring, it seems no accident that the day before, its chief executive, Eric Benhamou, announced that 3Com will spin off Palm Computing from its core computer-network equipment business. It was Mr Benhamou's refusal to spin off Palm last year that spurred Mr Hawkins to leave; discontented shareholders have forced the move now. The break-up could value Palm alone at $10 billion—the same as the whole of 3Com today.

The market for handheld computers, worth $1.6 billion worldwide last year, is forecast to double every year. 3Com now has 40% of it. At first glance Visor looks a lot like Palm: both use a handwriting system for inputting data and can synchronise with a desktop computer. But Mr Hawkins's new machine is cleverer than his old one. Through a slot in the back of the machine, plug-ins can transform Visor into a digital music player, a digital camera, a pager or even, from next year, a mobile phone. Handspring will outsource the manufacture of most of these plug-ins, to speed things up.

Handspring understands another crucial element: design. Mr Hawkins has long preached what other mobile-phone firms such as Nokia, or Apple Computer with its candy-coloured iMacs, have only just realised: that business accessories are becoming fashion items. After all, Mr Hawkins designed the Palm V, which is 22% costlier than one with twice the memory simply because of its sleek, light aluminium design. His Visors come in several splashy colours.

None of this guarantees that Handspring will lead the market. A newly independent Palm will be fierce competition. So will consumer-electronics groups such as Sharp and several mobile-phone makers, many of which have teamed up with Britain's handheld-computer group, Psion. As these devices converge, there will be several winners.

But Handspring's approach points to the future. Design and function, not just operating software, will determine how the handheld market develops. That is bad news for Microsoft, desperate to expand into the handheld world through Windows CE, a simpler version of its PC operating software. But precisely because it is a scaled-down derivative, CE does not work well on handheld devices. And though Microsoft will try hard to catch up, the handheld market requires skills that it does not yet have. This is an industry where the upstarts thrive.